Correlation Between Village Bank and Virginia National

Can any of the company-specific risk be diversified away by investing in both Village Bank and Virginia National at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Village Bank and Virginia National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Village Bank and and Virginia National Bankshares, you can compare the effects of market volatilities on Village Bank and Virginia National and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Village Bank with a short position of Virginia National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Village Bank and Virginia National.

Diversification Opportunities for Village Bank and Virginia National

0.29

Correlation Coefficient

Village Bank  Virginia National

Modest diversification

The 3 months correlation between Village and Virginia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and Virginia National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virginia National and Village Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Village Bank and are associated (or correlated) with Virginia National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virginia National has no effect on the direction of Village Bank i.e., Village Bank and Virginia National go up and down completely randomly.

Pair Corralation between Village Bank and Virginia National

Given the investment horizon of 90 days Village Bank and is expected to generate 32.0 times more return on investment than Virginia National. However, Village Bank is 32.0 times more volatile than Virginia National Bankshares. It trades about 0.07 of its potential returns per unit of risk. Virginia National Bankshares is currently generating about 0.03 per unit of risk. If you would invest  5,052  in Village Bank and on September 14, 2024 and sell it today you would earn a total of  2,698  from holding Village Bank and or generate 53.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.35%
Values	Daily Returns

Village Bank and  vs.  Virginia National Bankshares

Village Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Village Bank and are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Village Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Virginia National

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virginia National Bankshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Virginia National is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Village Bank and Virginia National

The main advantage of trading using opposite Village Bank and Virginia National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Bank position performs unexpectedly, Virginia National can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Virginia National will offset losses from the drop in Virginia National's long position.

The idea behind Village Bank and and Virginia National Bankshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.